The Million Dollar Way (The Bakken Oil Blog): 05/24/22

Tuesday, May 24, 2022

The Carnage Among EVs Today -- May 24, 2022

The carnage is seen in the one-year chart, but, wow, it's amazing to look at the six-month charts of these EV car companies: RIVN, TSLA, GM, F, RIDE, NKLA, FS. These numbers were at the close:

F: down over 3% today; trading around $12.50.
GM: down 2% today; trading just above $35;
TSLA: down 7% today; trading at $628 today; five months ago: $1,200
RIVN: down 5%; closed below $27
RIDE: down almost 13%; drops well below $2 / share -- a share is now less than a bottle of "two-buck Chuck" out in California
NKLA: down 6% trading below $6 / share.
FSR: down 13%; trading below $10 / share.

Fisker, link here:

My Favorite Chart -- May 24, 2022

Link here.

Bakken 5.0 -- Bakken Has Reached Maturity -- May 24, 2022

Oil wealth. Link here. WTI: $110.

Legacy Fund deposits. Link here.

Here is the graphic with no notations:

Bakken formation reaches maturity. Link here. Archived. Key paragraphs:

Formation maturity is defined in the report as having a majority of operators dedicated to producing their acreage on a consistent and steady pace — but with the added caveat that foreseeable radical growth in production is "less than likely."
A typical Bakken oil well is expected to produce more than 30 years worth of oil, however, favorable economic conditions, enhanced oil recovery efforts and other factors can, and often do, extend the life of a well.
There are two oil refineries in North Dakota, one in Mandan and the one in Dickinson.
Marathon Oil Corporation processes Williston Basin crude oil into gasoline, diesel, jet fuel, heavy fuel oils and liquefied petroleum gas. Marathon purchased its Dickinson Refinery in 2018 from Andeavor. The refinery was the first greenfield diesel refinery to be built in the United States since the late 1970s, and has been online since May 2015.

It's A Wash -- Globally -- May 24, 2022

Kashagan oil field is tracked here and linked at the sidebar at the right.

Headline today: oil production halves at Kazakhstan's giant Kashagan field.

routine maintenance, if anything in Kazakhstan is routine;

start date: May 19, 2022
end date: August 3, 2022

OPEC+ quota:

1.638 million bpd (May, 2022)
1.85 million bpd (June, 2022)

actual production:

cut in half since early May (due to maintenance)
production will stop completely in June due to maintenance

I don't know what Kashagan was actually producing prior to May, but let's say it was about 1.5 million bpd
so, globally:

Kazakhstan's daily production dropping about 1.5 million bpd; and,
Biden's release from the US SPR: 1 million bpd.

Net: - 0.5 million bpd

I often make simple arithmetic errors, but I'm pretty sure 1.0 minus 1.5 is close to a minus 0.5.

Again, that SPR release was very prescient, very timely, very fortunate.

Speaking of the SPR release, the "next" part of that 180 million-bbl release over six months was announced today:

again, this is a sale, not a "swap" which is the usual nature of things with regard to the SPR
specifics:
39 million sour bbls
1.1 million sweet bbls
total: 40.1 millioon bbls
delivery period for the sweet oil: June 21, 2022 - June 30, 2022
delivery period for the sour oil: July 1, 2022 - August 15, 2022 (slightly less than 1 million bopd)

All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them.

WTI: pretty much unchanged.

Two New Permits; Six Wells Released From Confidential List; One DUC Reported As Completed -- May 24, 2022

Daily activity report via Chrome, Monday, May 23, 2022.

Active rigs: 39 or thereabouts.

Two new permits, #38972 - #38973, inclusive:

Operator: Sinclair
Field: Lone Butte (Dunn County)
Comments:

Sinclair has perrmits for two Harris Federal wells in NESE 31-147-97,

to be sited 1843 FSL and 930 FEL, and 1839 FSL and 885 FEL

Six wells released from confidential list:

38630, n/d, Eagle Operating, Willy Miranda-State 16-4, Foreman Butte, McKenzie,
38622, n/d, Summit Carbon Solutions, Archie Erickson 2, wildcat, Mercer County,
38608, n/d, CLR, Bang 11-4H1, Cedar Coulee, Dunn County,
37183, n/d, Zavanna, Edgar 10-3 1H, Poe, McKenzie County,
36518, n/d, Crescent Point Energy, CPEUSC Austin 6-17-20-158N-99W-MBH, Williams County,
36516, n/d, Crescent Point Energy, CPEUSC Narcisse 6-8-5-158N-99W-MBH-LL, Ellisville, Williams County,

One producing well (a DUC) reported as completed:

32428, 206, BR, Phantom Ship 3A UTFH, McKenzie County;

Pop Quiz -- May 24, 2022

The 11 GICS stock market sectors:

energy
materials
industrials
utilities
healthcare
financials
consumer discretionary
consumer staples
information technology
communication services
real estate

Name the one sector and the one "type" of facility in that sector in which we will never see another "greenfield" addition. If the answer "works" but is not of interest from an investment point of view, the answer will be counted correct but ignored.

Definitions:

"greenfield": brand new facility, in a new location;
"brownfield": new facility on an a previously used location fro same type of facility; or an expansion of an existing facility.

For example, one might say, "We will never see another brand new bank, financials sector, built in the US again." Of course, that's obviously wrong, but had to come up with an example.

Another possibility might be a launch pad for space vehicles, industrials?

Possibly, an aircraft carrier, again, industrials.

Perhaps a bust of Donald Trump on Mount Hood. Materials?

A dam in California? Materials?

So, now, fill in the blanks: "We will never see another brand new ____________, ____________, built in the US again."

I can think of only one example.

If you get the correct answer, it's an actionable investment "hint."

We'll discuss it tomorrow.

Market Headlines, Links, And Comments -- May 24, 2022

Disclaimer: this is not an investment site. Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.

All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them.

Let me start here: I made my first investment decision in 1984 -- I made several first-time ever investment decisions that year and the following couple of years:

remember, in 1984, there were no discount brokers, at least none of which I was aware and was forced to pay exorbitant commissions if I wanted to buy shares in individual companies from brokers
I opened an account with Merrill Lynch
I had limited resources to follow and/or learn about the market
my "investing 101" was an incredibly great course from Forbes
my first big "a-ha" was learning the difference between "load" and "no-load" funds and I made the right decision

for diversity, I invested in three different no-load funds; all of which I still hold
two of three converted to IRAs

individual holdings

my first investment in an individual stock: Burlington Northern railroad (I forget the ticker at the time, BNI?)
my second investment in an individual stock: San Diego Gas & Electric which has morphed into Sempra (SRE)
I still hold both, all with re-invested dividends. BNI is now known as BRK-B (LOL)

in all those years -- 38 years -- from 1984 to today, 2022 -- I don't recall any period in which the market made so little sense as it does now, and now offers so many opportunities for all investors.
I am less interested in the price I am paying for shares (I am not a market time) and much more interested in accumulating shares

so many companies are so cheap by historical standards right now
my investment horizon is 30 years;
I have no plans to ever use any of my investments for current expenses; all will be passed down to the daughters and grandchildren
I doubt they will ever check to see what I paid for individual shares

Exhibit A:

SNAP crashes and takes the market with it. Are you kidding me? An "instant messaging service" is the market? LOL. But wow, what an opportunity for investors.

Exhibit B:

in the old days, the 52-week high and low were "reasonable" goalposts.
now, the 52-week charts are fairly meaningless.
for traders, it's the five-day chart;
for investors, it's the 6-month chart.
seriously, look at the six-month charts for any of your non-energy favorites and look at the carnage.
in many cases, the carnage is seen in the one-year chart, but, wow, it's amazing to look at these six-month charts: RIVN, TSLA, GM, F. And those are just the EV companies.

F: down 4% today
GM: down 3.5% today
TSLA: down 5.5% today; trading at $637 today; five months ago: $1,200
RIVN: down 7% -- ouch
RIDE: down 9%; drops below $2 / share -- a share is now less than a bottle of "two-buck Chuck" out in California
NKLA: down only 4.4% -- looks like a relative winner today -- why? I have no idea. LOL.
the stock I wouldn't touch with a 10-foot pole? ZM: is up 5.4%.

but before commenting, check:
the six-month chart, one-year chart
check your crystal ball

SNOW: down 4.75%.
DIS: down 4.5% -- as noted yesterday, no hurry.

Oh, that's right:

the Fed minutes have just been released (at least my hunch is that they have just been released); and,
the Fed says they will put that proverbial pedal to the metal to send the US into a full-fledged recession to stop inflation
we had to kill the patient before he got worse, or something to that effect
even the oil stocks are down significantly, even though WTI is down a dime to $110.10;
story in the news yesterday: oil companies fear the Fed more than they fear a glut of oil or a drop in the price of oil.

Speaking of cars: Toyota announces another production cut, this time due to lock downs in Shanghai.

an earlier production cut was announced back on May 13, 2022;
now, from ArgusMedia, only eleven days later.

A bright spot: energy.

from Barron's, free cash flow gushing -- their word, not mine --for four Permian operators;

Devon -- listed first and in the headline;
then, in the story, add Diamondback, Coterra, and Pioneer Energy

XOM: previously posted but a more complete story from Rigzone, XOM sold natural gas assets in its Barnett Shale gas play in Texas for $750 million.

for XOM, $750 million doesn't sound like much -- the play must have been a nuisance for XOM. LOL.

Last month, ExxonMobil announced estimated first-quarter 2022 earnings of $5.5 billion. First-quarter results included an unfavorable identified item of $3.4 billion associated with the company’s planned exit from Russia Sakhalin-1, Exxon highlighted. Earnings stood at $8.87 billion in the fourth quarter of 2021 and $2.73 billion in the first quarter of 2021.

Other market news that caught my eye:

apparently Airbnb will exit China -- at least "inside" China and will focus on Chinese folks who are flying out of country for business or pleasure; link here.
Electronic Arts (EA) in talks with Apple, Inc (AAPL) as well as Disney, Amazon; link here;

Snow, two links:

CNBC: high-priced subscription needed but headline tells me all I need to know;
Forbes: free access and probably much more balanced in its analysis.
SNOW today: down 6%; no hurry.

Interesting factoid, link here:

Advertising: something I've never understood. This might help.

Pet peeve: folks feeling they have to use the "f" word on twitter to make a point. I would "unfollow" all those folks using the "f" word but I would be left with one or two accounts to follow.

Energy Headlines, Links, And Comments -- May 24, 2022

RBN Energy: will high crack spreads be enough to balance refined products markets, part 2. For me the answer is irrelevant. It will be what it will be. The importance of this post today is the understanding that:

oil production is not the primary mover for the price of gasoline;
takeaway capacity, in general, is no longer an issue, except in places like New England and Long Island;
the high price of gasoline is being driven by refinery issues, and it's a lot more difficult to manage refinery issues than drill, produce, and transport more oil.

Scholtz: here's a guy that really does prove that life imitates art.

in this case, Germany's Chancellor Olaf Scholze sounds just like Sgt Schultz (Hogan's Heroes)
Scholz is imploring oil- and gas-producing countries to increase production to help lower fuel prices
helllloooo ... it's not a lack of oil -- it's a lack of refinery capacity, regulations, yada, yada, yada, and not oil
in addition, Germany continues to shut down their paid-for and emission-free nuclear power plants and will go back to coal if they need to (and they will need to)
in addition, one of the world's largest oil "reserves" is just across the border (and perhaps even under German soil): the Paris Basin
so, Chancellor Scholz meet Sgt Schultz

OPEC+: some general comments.

I'm sure the Saudi Arabian minister of energy is aware of the refinery issue despite continuing to suggest it's all about lack of space capacity;
he seems to be speaking about spare capacity with regard to OPEC+ but he also seems to imply it's a global issue, affecting both Russia and the US
if that is indeed the case, a lack of spare capacity in all three regions (US, Russia, and the Mideast), it is for different reasons among all three
Saudi is strengthening its ties and commitment to Russia based on headlines in the news yesterday;
I am not sure what that is all about, but my hunch it has to do with the personal feelings that the king-in-waiting has with the king-in-Washington (DC)
Saudi talks about lack of investment that is causing the current lack of "spare capacity." Again, he must be referring to lack of adequate facilities worldwide to meet specific refined product demand, like gasoline and diesel, particularly the latter

Russia:

lest folks forget it, there are (at least) ~~three four~~ five main components when it comes to Russia's balance of payments and the oil sector
production: long pole in tent -- western oil service companies have now departed Russian oil fields, taking their technology, spare parts, financial capital and expertise with them. Over time, the mainstream business media (Forbes, Bloomberg, CNBC) will start to write about this.
new markets: huge cost to shift from one market to a new market; in this case, switching from Europe to China.

finding new markets: apparently a record number of tankers carrying Russian oil are sitting out at sea waiting for a destination
some 62 million barrels of Russia's flagship Urals crude oil, a record amount, is (are?) sitting in vessels at sea, data from Vortexa, as traders struggled to find buyers for the crude oil. Link here.

transportation:

to Europe: relatively cheap; pipelines -- including brand new pipelines -- are an incredibly inexpensive and efficient way to move crude oil, natural gas, and refined products
to Asia: sea-going tankers

payment: new customers (i.e., China and India) won't pay top dollar for Russian oil;

they are getting Russian oil and a huge discount;
must drive Putin nuts if anything drives him nuts, which I doubt, except losing his yacht to the Italians

embargoes:

Germany expects EU embargo on Russian oil within days. Link here.
does anybody remember the OPEC embargo against the US decades ago; is this now Europe's turn to see what an embargo means -- although for completely different reasons.

so, where does this lead us? Well, back to production, here it is, right on cue, from Bloomberg News via the Financial Post: Putin's state oil champion suffers biggest production drop. Ya gotta love it. Link here.

US pipelines:

FERC is focused on approving (and apparently has approved) new pipelines that will get more US natural gas to the (Texas/Louisiana) coast for export to Europe; think: Berlin Airlift at height of Cold War.
an aside, unrelated to pipelines for natural gas exports, the New England region has shown no interest in any new natural gas pipelines
one can say the same for California, but California, unlike New England, has other issues -- specifically geology and seismic activity that does not favor pipelines.

7-handle:

speaking of California, signs for $7-gasoline are now popping up all over Los Angeles;
the good news: the high price of gasoline is a non-story in southern California now that everyone is driving EVs and vacationing in the outrageously expensive theme parks where they can avoid issues like the US economy;
JPM has a note on the price of gasoline, suggesting the US retail price will surge another 37% by August to a $6.20 / gallon national average; to get to that average, we're going to see some gasoline with an 8-handle
if you do go to that link, be sure to read the additional comments; one knows immediately who understands what is going on by the questions and comments being made;
for example, as soon as someone asks what price crude oil needs too reach to see $6.20 gasoline immediately tells me that individual is not paying attention;
again, it's a refining issue now; flood the nation with oil from the SPR and the price of gasoline won't drop; nor with the price of crude oil, for that matter -- at least not enough to make a difference.

There two most interesting stories coming out of Washington (DC) or wherever Biden was yesterday. The first had to do with the price of gasoline; the second had to do with going to war with China. We'll cover the second story elsewhere; this post is focused on energy.

President Biden has thrown in the towel on high gasoline prices, now thanking American citizens for their resolve in supporting him, supporting his policies, supporting $10-gasoline, supporting likely electricity outages this summer all in the name of energy transition.
we'll see how ths plays in Peoria later this autumn
Jen Psaki left town just in time: how does anyone explain why world leaders aren't even taking Joe Biden's phone calls any more when it comes to oil?

Later, May 25, 2022: with regard to the second story --

the US policy on Taiwan is: ambiguous
in Japan last week, President Biden clearly said the US would defend Taiwan if invaded (by the Chinese)
the next day, the White House walked back that declaration and said the US policy regarding Taiwan has not changed: the policy remains officially ambiguous (wink, wink).

NDIC Site Coming Back Up -- May 24, 2022

The NDIC oil and gas website is coming back up very quickly but there are still glitches preventing me from getting to most NDIC sites. That's fine. It should eventually be back to "a new normal."

The daily activity report was not posted yesterday, for Monday, May 23, 2022. It may be posted now, but I'm moving on. Will check again tomorrow.

It appears the "new" NDIC oil and gas website does not work with Firefox (my favorite browser) and is intermittently working with Safari (the Apple browser). So far, it continues to work with Chromium (the google browser with "least" security protections -- and I guess that's why it continues to work).

WTI: $110.60.

Active rigs: 39 or thereabouts.

oil production is not the primary mover for the price of gasoline;
takeaway capacity, in general, is no longer an issue, except in places like New England and Long Island;
the high price of gasoline is being driven by refinery issues, and it's a lot more difficult to manage refinery issues than drill, produce, and transport more oil.

U.S. diesel inventories are at their lowest level for May since 2000 and East Coast stocks recently hit their lowest mark for any week or month since the EIA started tracking them in 1990. Crack spreads for diesel — and, more recently, for gasoline — have gone parabolic, giving refiners the strongest financial signal ever to produce more diesel and gasoline as we enter the summer travel season. More jet fuel too. The problem is, U.S. refineries already are running flat-out. And Europe? It’s facing big cuts in crude oil and refined-products imports from Russia as well as much higher prices for — and possible shortages of — oil and natural gas, the latter being the primary fuel for operating refinery hydrocrackers, which upgrade low-quality heavy gas-oils into high-quality diesel, gasoline and jet. It’s a mess, and not easily fixable, as we discuss in today’s RBN blog.

U.S. and global energy markets have always had challenges to deal with — nothing so far-reaching, multifaceted and interdependent can run as reliably and smoothly as a Swiss watch, whose gears and springs operate within a glass-and-gold vacuum. But it would be hard to find a time when energy markets are in as much disarray as they are today. The COVID pandemic, a precipitous economic slowdown (and partial rebound), a nascent energy transition, Russia’s war on Ukraine, and China’s big-city lockdowns, among other things, have combined to wreak havoc, with the most significant effect being supply/demand imbalances that have propelled prices for crude oil and refined products (and natural gas) sharply higher.

Legacy Fund, Deposits -- Simply Outstanding -- May, 2022

With all the notations on the original graph, it was easy to miss how incredible the April, 2022, crude oil and natural gas sales in North Dakota were in April, 2022.

The deposits for May, 2022, would reflect receipts for the previous month, April, 2022, the month when more than a quarter (?) of North Dakota production was shut in for a number of days (weeks?) due to polar vortex, or whatever that incredible cold snap / blizzard was.

Here was the graphic with notations: